Commercial real estate could look different post-pandemic
The exhibitor building in downtown Grand Rapids has eight restaurants, hotel space, meeting rooms and leisure facilities. Courtesy The Image Shoppe
The deadly pandemic has put commercial real estate at a crossroads as businesses, businesses and individuals decipher how to safely return to a new normal or permanently revolutionize the way they work.
Subsectors of the commercial real estate industry that have taken the brunt of the initial pandemic are returning to a volatile economic market. Some restaurants and retailers have permanently closed their doors while others are redesigning the way they deliver and deliver goods and groceries to consumers.
Most landlords and tenants have managed to reopen their doors to business, in part thanks to government funding such as the Paycheck Protection Program loan.
“The landlords were given assistance so they haven’t really felt the stress for the past 12 months, unlike if they weren’t getting government assistance,” said Jeffrey Tucker, senior managing director brokerage and principal at Bradley Company. “We haven’t seen many vacancies and the vacancies are starting to fill in due to the continued growth in (Class) A centers. We didn’t think we’d see this last May. We thought we were going to experience real stress. Businesses were closing, (other) spaces weren’t open for business, and the parking lots were empty, but we really didn’t see much of it.
With those funds, companies like restaurants that had to close their restaurants last year and offer roadside pick-ups last year have had to get creative over the long term, according to Bill Bussey, associate broker at Bradley Company.
“There have been many restaurants that have no pass-through, but those who have found a way to add this have done so,” he said. “For example, many places like Biggby only offer drive-thru and sometimes both – drive-thru and indoor dining. They made buildings they can put in a parking lot, and there might be a drive-thru or two, just a double-drive-thru and some tables outside, but you can’t go inside. “
Tucker said other companies that have mastered drive-thru efficiency are Chick-Fil-A and pharmacies, including those in places like Meijer and Walgreens, because there is less person-to-person contact. In addition to less contact, the addition of drive-thru proved beneficial for businesses and landlords during the pandemic.
“From a landlord’s point of view, if they have a mall and it’s not a freestanding drive-through location – when a landlord can only have two end caps for their investment, for their mall and not two – Thrus at the end – that’s loss of income for she, ”he said. “When they can’t figure out how to navigate the parking lot and get on and off the main road Thoroughfare, That’s a loss of income for them because the end cap with a potential degree of passage could potentially be built elsewhere for $ 22 per square foot, and if a Starbucks or McDonalds can end up going they could probably get $ 35 per square foot. There is significantly more new income and that also applies to pharmacies. “
Tucker said outdoor seating alongside drive-thru will be a requirement for any new restaurant.
“They could reduce some of their internal footprints, but I wouldn’t be opening a new restaurant if I didn’t have at least 20-30 outdoor seating (options) because whether it’s COVID or the closest, we see the value in that,” he said . “People in Michigan love to be outside.”
While some companies are closing, Bussey is opening and expanding in new locations where they can become more visible. Some popular retail stores have opened new locations across the country this year.
The companies and number of new locations this year per Bussey include:
- 5 bottom: 170-180
- Old Navy: 30-40
- Aldi: 100
- Citi Trends: Dec.
- Dollar General: 1,500
- TJ Maxx: 122
- American eagle: 60
- Fabletics: 24
- Dollar tree: 1,000
- Burlington: 75
- Goal: 30-40
- Starbucks: 50
- At home: 400
Daniel Burns, associate broker at Bradley Company and attorney at Dan Burns Law in Grand Rapids, said the pandemic has made employers think about how they will use their office space.
He said some employers are opting for open space, a concept employers had adapted before the pandemic. However, now some employers are also considering moving out of the office and letting their employees work outside of the office.
Burns says employers are now maximizing the use of technology, which could become an ongoing practice. While there were many mergers and branch closings prior to the pandemic, Burns said banks and insurance companies are reassessing the way they do business.
“I think you will see banks and insurance companies reevaluating their space and taking a close look at which of these groups of people we need here, which are flexible and which we will never bring back,” he said. “What banks and insurance companies are doing will trickle down and other companies will follow suit.”